Accounting Seminar Notes

Chapter 6 Homework Solutions 6-16 Sales budget, service setting. 1. Rouse & Sons| 2011 Volume| At 2011Selling Prices| Expected 2012Change in Volume| Expected 2012 Volume| Radon Tests| 12,200| $290| +6%| 12,932| Lead Tests| 16,400| $240| -10%| 14,760| Rouse & Sons Sales Budget| For the Year Ended December 31, 2012| |  |  |  | | Selling Price| Units Sold| Total Revenues| Radon Tests| $290| 12,932| $3,750,280| Lead Tests| $240| 14,760| 3,542,400| |  |  | $7,292,680| 2. Rouse & Sons| 2011 Volume| Planned 2012 Selling Prices| Expected 2012 Change in Volume| Expected 2012 Volume| Radon Tests| 12,200| $290| +6%| 12,932|
Lead Tests| 16,400| $230| -7%| 15,252| Rouse & Sons Sales Budget| For the Year Ended December 31, 2012| |  |  |  | | Selling Price| Units Sold| Total Revenues| Radon Tests| $290| 12,932| $3,750,280| Lead Tests| $230| 15,252| 3,507,960| | | | $7,258,240| Expected revenues at the new 2012 prices are $7,258,240, which is lower than the expected 2012 revenues of $7,292,680 if the prices are unchanged. So, if the goal is to maximize sales revenue and if Jim Rouse’s forecasts are reliable, the company should not lower its price for a lead test in 2012. 6-17 Sales and production budget. Budgeted sales in units200,000
Add target ending finished goods inventory 25,000 Total requirements 225,000 Deduct beginning finished goods inventory 15,000 Units to be produced 210,000 6-18Direct materials purchases budget. Direct materials to be used in production (bottles)2,500,000 Add target ending direct materials inventory (bottles) 80,000 Total requirements (bottles)2,580,000 Deduct beginning direct materials inventory (bottles) 50,000 Direct materials to be purchased (bottles)2,530,000 6-19 Budgeting material purchases. Production Budget: Finished Goods (units) Budgeted sales45,000 Add target ending finished goods inventory18,000

Total requirements63,000 Deduct beginning finished goods inventory16,000 Units to be produced47,000 Direct Materials Purchases Budget: Direct Materials (in gallons) Direct materials needed for production (47,000 3)141,000 Add target ending direct materials inventory50,000 Total requirements191,000 Deduct beginning direct materials inventory 60,000 Direct materials to be purchased 131,000 6-20Revenues and production budget. 1. | SellingPrice| UnitsSold| TotalRevenues| 12-ounce bottles| $0. 25| 4,800,000a| $1,200,000| 4-gallon units| 1. 50| 1,200,000b| 1,800,000| | | | $3,000,000| a 400,000 ? 12 months = 4,800,000 b 100,000 ? 2 months = 1,200,000 2. Budgeted unit sales (12-ounce bottles)4,800,000 Add target ending finished goods inventory 600,000 Total requirements5,400,000 Deduct beginning finished goods inventory 900,000 Units to be produced4,500,000 3. = 1,200,000 + 200,000 1,300,000 = 100,000 4-gallon units 6-21 Budgeting: direct material usage, manufacturing cost and gross margin. 1. Direct Material Usage Budget in Quantity and Dollars| | | |  | | Material|  | | Wool| Dye| Total| Physical Units Budget| | | | Direct materials required for| | |  | Blue Rugs (200,000 rugs ? 36 skeins and 0. 8 gal. )| 7,200,000 skeins | 160,000 gal.  | | | |  | Cost Budget| | | | Available from beginning direct materials inventory: (a) | | |  | Wool: 458,000 skeins| $ 961,800| | | Dye: 4,000 gallons| | $ 23,680|  | To be purchased this period: (b)| | |  | Wool: (7,200,000 – 458,000) skeins ? $2 per skein| 13,484,000 | |  | Dye: (160,000 – 4,000) gal. ? $6 per gal. | _________| 936,000| | Direct materials to be used this period: (a) + (b)| $14,445,800 | $ 959,680| $15,405,480| 2. = = $2. 55 per DMLH = = $12 per MH 3. Budgeted Unit Cost of Blue Rug| | | | | | Cost perUnit of Input| Input perUnit ofOutput| Total| Wool| $2| 36 skeins| $ 72. 0| Dye| 6| 0. 8 gal. | 4. 80| Direct manufacturing labor| 13| 62 hrs. | 806. 00| Dyeing overhead| 12| 7. 21 mach-hrs. | 86. 40| Weaving overhead| 2. 55| 62 DMLH| 158. 10| Total| | | $1127. 30| 10. 2 machine hour per skein36 skeins per rug = 7. 2 machine-hrs. per rug. 4. Revenue Budget| | | |  | | Units| Selling Price| Total Revenues| Blue Rugs| 200,000| $2,000| $400,000,000| Blue Rugs| 185,000 | $2,000| $370,000,000| 5a. Sales = 200,000 rugs| Cost of Goods Sold Budget| | |  | | From Schedule| Total| Beginning finished goods inventory| | $ 0| Direct materials used| $15,405,480|  |
Direct manufacturing labor ($806 ? 200,000)| 161,200,000|  | Dyeing overhead ($86. 40 ? 200,000)| 17,280,000|  | Weaving overhead ($158. 10 ? 200,000)| 31,620,000| 225,505,480| Cost of goods available for sale| | 225,505,480 | Deduct ending finished goods inventory| | 0 | Cost of goods sold| | $225,505,480| | |  | 5b. Sales = 185,000 rugs| Cost of Goods Sold Budget| | |  | | From Schedule| Total| Beginning finished goods inventory| | $ 0| Direct materials used| $ 15,405,480|  |
Direct manufacturing labor ($806 ? 200,000)| 161,200,000|  | Dyeing overhead ($86. 40 ? 200,000)| 17,280,000|  | Weaving overhead ($158. 10 ? 200,000)| 31,620,000| 225,505,480| Cost of goods available for sale| | 225,505,480 | Deduct ending finished goods inventory ($1,127. 30 ? 15,000)| | 16,909,500 | Cost of goods sold| | $208,595,980| 6. | 200,000 rugs sold| 185,000 rugs sold| Revenue| $400,000,000| $370,000,000| Less: Cost of goods sold| 225,505,480| 208,595,980| Gross margin| $ 174,494,520| $ 161,404,020|

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